The Myths Surrounding Health Care Policy. A random excerpt:
But in practice, it is not so easy for statisticians and economists to over-ride the judgment of doctors. As anyone who has ever tried to set up a bonus system for salespeople can tell you, all compensation systems can be “gamed.” It is easy for doctors to change how they report what they do, without having much effect on their actual decisions. In fact, this was what happened in the largest experiment with “pay for quality” to date, which was conducted in the UK.
That’s why the modern healthcare needs to clearly separate diagnosis and the selection of treatment from the delivery of treatment. The diagnosis side has simply cannot benefit in any way from the choices made on behalf of their patients.
Good point Tom. I’m surprised I’ve never heard anyone suggest that before (seriously).
The USSR was never able to solve the “gaming” problem. I doubt we’ll be anymore successful.
The Peter Principle of management, nothing valuable can be measured, nothing that can be measured is valuable. The physical world is more accommodating.
You say it is a myth that high prices are responsible for America’s large health care bill.
But we know that US prices are much, much higher for comparable procedures, even in expensive countries like Japan. Always dangerous to just look stuff up on the internet, but these values from healthytokyo accord with my own experiences: Cardiac bypass, US: $152K, Japan: $15K; Appendectomy, US: $30K, Japan, $3.6K.
These aren’t pill prices, which are an extreme case of price differences for special reasons. These are procedures most of the cost of which could be traced to medical services performed by providers on site. These are not 30% or 50% differences, but order of magnitude-level differences.
The greater size of America’s large health care bill per capita is due to a combination of extra treatments per capita and high prices per treatment.
I don’t read the RCA post as assigning most of the responsibility to the former while dismissing the latter as negligible, which is what one would require to declare it a ‘myth’. But if the prices are an order of magnitude higher, then the demand for additional services would need to be two orders of magnitude higher to make the price differential negligible in terms of accounting for the “large health bill.” And that’s not the case.
Furthermore, does the randomcriticalanalysis post force that result by adjusting for “Health PPP”, which embeds the over-inflated prices into the analysis?
Perhaps the point was elucidated more comprehensively in the longer essay, but I don’t think the “high price contribution is not very important” claim has been proven yet.
Do we really? I’ve yet to see a solid apples-to-apples comparison between countries besides the quasi-prices produced by OECD for their health PPP series. The individual quasi-prices and the composite weighted “hospital services” price index has a cross-sectional elasticity of approximately one with respect to national income and the US does not appear to jump off the trend line.
I agree: it is dangerous to draw firm conclusions from data like that. Keep in mind that while Japan is a highly developed country, US adjusted disposable income and average wages have nonetheless been about 50% higher than Japan for the past decade (which implies similar increases in hospital services). Although the OECD hasn’t published the actual quasi-prices for Japan, their hospital services PPPs, which are derived from these prices, suggest average prices for similar services are not appreciably cheaper relative to income.
Though it is likely true the price of labor-intensive health services are markedly higher in the US than in much poorer countries, it’s not particularly high relative to US income levels and offsetting effects of trade and productivity increases in certain manufactured goods does much to offset the higher cost of domestic labor inputs. Net-net- both the cross-sectional and domestic time series data suggest prices (or inflation) explains virtually nothing in the long run. In other words, the reason why health accounts for an ever rising share of income has little-to-nothing to do with the price of health rising faster than incomes and almost everything to do with rising volumes (which is mostly a result of higher intensity on a per encounter basis as opposed to changes in disease burdens or seeking of care).
Sure, if we had, say, Turkey’s comparatively low wages the price of comparable hospital services would be quite a bit cheaper in real terms, but that doesn’t mean the same treatment is much more affordable, i.e., relative to the incomes people actually earn there. The reason US health care seems so expensive (usually) is that when you do seek care so much more is apt to be done on your behalf (intensity of care) and this care is obviously not particularly cheap.
Whether HCE is deflated by PPPs for health or GDP doesn’t change much. The overall price of health care is higher in high-income countries as compared to low-income countries, so adjusting for health PPPs reduces the estimated volumes consumed some, but much less so than you might expect and the US isn’t particularly expensive.
Indeed. As we have seen systems like Switzerland and Singapore are no go in the USA.
You say that Singapore’s system works because the middle class there is willing to save, implying it won’t work here because Americans are unwilling to save. Couldn’t that be fixed just by requiring Americans to save some minimum amount. Note, required saving can be implemented in many ways without an explicit mandate on individuals. For example, one could require that *employers* contribute to medical savings accounts. (Of course, that’s economically equivalent to requiring workers to save, but employer mandates seem more politically acceptable than employee mandates.) One could also levy a payroll tax, or raise or divert some of FICA or Medicare taxes, to fund government contributions to medical savings accounts. There are many combinations of employee mandates, employer mandates, and government taxing and spending that are economically equivalent, and proponents of a Singapore-style system can choose the combination that is most politically and constitutionally acceptable.
Alternatively, we could just allow Americans to save whatever they choose. That may not produce the same chosen outcomes as in Singapore, but it would retain the same desired features of incenting consumers to hold down costs. Even if Americans ended up saving and spending less than Singaporeans on health care, that outcome would reflect Americans’ choices and, thus, would still result in higher *utility and welfare*.
Question: don’t HSAs provide a means by which to transition to a Singapore-style system? For example, if we capped the deductibility of employer-provided health insurance and raised the limits on deductible employer and employee contributions to HSAs, that would incent employers to move away from comprehensive towards catastrophic insurance while increasing contributions to HSAs. The increase in HSA limits would also make capping deductibility of insurance premiums more politically palatable.
The forced savings is about making sure people have a nest egg/cat insurance for when they get sick. It takes as given that people won’t be allowed to die for lack of money (in a pinch the government will end up footing the bill), and then demands that people do the responsible thing and try to build up the resources to pay for their own care if they get sick. It does not increase my “utility and welfare” if people blow all their money and then stick me (the taxpayer) with a medical bill.
This fails with the Obamacare mandate in part because Obamacare demands you buy comprehensive coverage as opposed to cat insurance/personally earmarked medical savings account for yourself.